Sold! Used Optical Equipment on the Block

While entrepreneurs await the development of advanced technology that will re-ignite the Internet revolution, used optical equipment is fueling another sort of online business -- and in a very different way: It's being sold at auction.

About three years ago, business-to-business auction houses such as DoveBid in Foster City, Calif., and Henry Butcher International Ltd. in London, started putting capital equipment and surplus inventory on the block for industrial clients and bidders.

More than corporate versions of e-Bay, these auctioneers allow customers not only to buy equipment in bulk, but also to bid for the purchase of entire factories. Also, both companies offer traditional pre-auction services. If desired, professional appraisers may walk through the site to value and tag each item for sale, to compile descriptions of all lots into an illustrated brochure and to alert potential buyers via advanced direct marketing.

Want a slightly used Exfo IQ-5320 multiwavelength multimeter or a Newport 505 laser diode driver? In December, these and similar items went on DoveBid's block in a multimillion-dollar auction of surplus test and measurement equipment at Nortel Network Ltd. sites in Boca Raton, Fla., and Lachine, Quebec, Canada. In the same month, Henry Butcher dropped the gavel on more than 20,000 lots of Nortel equipment located in Canada, the UK, Switzerland and Northern Ireland. DoveBid also held an auction last month for equipment at Agilent factories in San Jose, Calif., and in Apeldoorn, the Netherlands. One might interpret these events as symptomatic of corporate financial trouble stemming from the sagging telecommunications market. But online auctions are an appealing venue for liquidating used and surplus equipment. For one thing, Webcast events attract larger numbers of buyers because they eliminate the need to travel to distant sites to bid. And more buyers means higher bidding.

One recent online auction attracted more than 6000 buyers worldwide, according to DoveBid. Almost 1000 of them were in the room, while another 5000 participated online.

"On average, when we compare on-location auctions to Webcast auctions, we are seeing about a 100 percent increase in the numbers of bidders at Webcast auctions because of the Internet," said Shanta Avadani Kohli, a company representative.

Auctions should not be interpreted simply as a sign of financial instability, but rather as a universally useful asset-management tool, said Daphne Li, chief strategy officer for DoveBid.

"As soon as a company knows it has idle assets, we recommend they auction them as quickly as possible," she said. "The rate of obsolescence for technology means that every day the value of that asset is declining. And there are other costs to waiting, such as inventory holding, real estate and maintenance."

That said, Li also acknowledged a cyclic pattern in the auctioned equipment business. During boom times, companies are expanding their factories and have to get rid of old equipment, but during the bad times, they are often trying to improve their return on assets, and small companies are trying to acquire new assets.

Neither auction house can disclose names of successful bidders or how much they paid, but the typical balance of end users and resale brokers appears to have tipped in favor of end users, said Li. She speculated that, like DoveBid's clients, brokers have inventory problems of their own. As for end users, they are a difficult group to define because the assets they're after often include everything from office chairs to complex manufacturing machinery.